No Guarantees With Attorneys' Fees

Published on: 
01/26/2012
What we called the "American Rule" requires that people pay for their own attorneys' fees regardless of the outcome of a lawsuit.

That is very different from the practice followed in England, which requires the losing party to pay for the prevailing party's fees, in addition to its own.

The rule does not apply when caselaw, a contract or a statute (referred to as a "fee-shifting" statute) allows a successful litigant to obtain attorneys' fees and other expenses from the losing party.

Courts and state legislatures can also get involved by trying to regulate "excessive" fees.

Two recent news developments illustrate the controversy that can emerge from the latter trend:

In Wisconsin, the Republican-controlled Legislature was so incensed over a lawyer who won a $12,500 judgment against an auto dealership and received $150,000 in attorneys' fees that they adopted a 2011 law signed by the governor limiting counsel fees to three times the judgment.

With such limitations, lawyers will be less likely to tackle consumer lawsuits, the obvious intent of the statute.

In Delaware, a judge approved $285 million in attorneys' fees to two plaintiffs' firms in a shareholder derivative suit. The firms reportedly spent 8,000 hours on the case, equating the award to $35,000 per billable hour.

Despite the fact that the judge praised the firms for their work, and the lawyers asked for less of an award than they were entitled to seek under their fee agreement, the press, including the Wall Street Journal, criticized the award as an example of lawyer greed.

Now comes a new fee controversy in the other direction. In January, according to reports in Bloomberg News and other sources, the non-attorney experts defending allegedly indigent financier R. Allen Stanford in Houston in federal court against charges that he ran a Ponzi scheme were ordered by the court to continue working on the case after they tried to quit over not being paid.

Appellate judges controlling the former billionaire's taxpayer-funded defense budget had said they would limit and withhold the experts' compensation until after conclusion of his trial.

Stanford's own lawyers asked the judge to let them quit the case, saying budget restrictions on the publicly paid defense were hampering their effectiveness. The judge refused and ordered the attorneys to remain as defense counsel.

Obviously, the court was legitimately concerned about the image of the profession by assuring the constitutional right to counsel, even for indigents, and the professional responsibility of lawyers to contribute to society.

But there is an equally important issue: What about the lawyers' right to select their own clients, and the need and right to be able to advance their personal economic interests?

The lawyers had been devoting extensive preparation time to the defense and suddenly were told they had to keep working without being paid. That obviously is a high-profile case, but could a court issue the same order to a small law firm defending an indigent person when the stakes are lower?

Those are important questions of personal rights and obligations. If nothing else, the cases discussed here illustrate that nothing about attorneys' fees is guaranteed.

In the first two cases cited, the attorneys were paid, though later unfairly criticized (in my opinion). In the latter case, the lawyers were pressed into involuntary servitude at great personal and financial sacrifice by a judge who had his own personal agenda. The issues were not the judge's to solve; rather, they are society's.

And if society didn't or couldn't address the issue — the right to counsel even in civil matters, which I have discussed in previous columns — it was not the place of that judge to conscript honorable lawyers seeking to practice law in a business-like way.

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